What Makes a Great Company?

Enduring companies share some common traits.  How’s yours doing?

When do companies become great? When do they become bigger than the person who leads them, bigger than their stated purpose or their value to their customers?

When do organizations become enduring?

It’s a question I ponder quite a bit. After all, our firm, WGP, is explicitly focused on “enduring” performance for our clients, and that sounds all well and good, but how does it happen?

Enduring organizations come in many shapes and sizes, but the truly enduring organizations I have been around or have been a part of have a few things in common. I think endurance comes from a number of things, so my list is incomplete, but it has to be.

The first aspect is vision. Proverbs 29:18 says “Where there is no vision, the people perish…”  Think about that for a second: Thousands of years ago, a lack of vision was attached squarely to death. The same is true in modern institutions: when there is no binding vision, fragmentation occurs; people find their own vision, and institutions suffer. Vision is about a state of arrival, except you may never arrive.

The second aspect is an overt lack of self-centered leadership. These leaders are harder to find these days, but it’s not impossible.  By lack of self-centeredness, I do not mean lack of self-interest; I don’t know that a leader who is not truly self-interested can thrive in modern institutions; a commercial mindset depends on an understanding of value and trade, which involves self-interest at some level.

What I mean by self-centeredness, or rather, the lack of it, is that there’s a stage when really effective leaders realize they have “enough” power, influence, money, or responsibility, and they become sharers: They are no longer focused only on their individual goals.

An iconic story on this note for me came from the primary builder of McKinsey & Company, Marvin Bower. I never met Marvin, but I came into McKinsey when people still knew him. The story is that when Marvin Bower turned 60, he sold the shares he owned–a substantial number–back to the firm at book value.  He could have easily sold his shares for market value, but that would have forced the firm into debt.  This truly massive gesture was one of a leader who had moved on from self-centered to merely self-interested; he worried about self-centeredness and what it could do to the firm he built. In his words to that firm:

“Have we begun to think too
much about money because
we’ve got so much coming in?”
he asked. “People who make a
lot of money get to thinking
about having four homes to keep
up, or maybe they want a yacht.
If an individual consultant has
to make a professional decision
on the spot and he has too many
obligations, I worry that he is
likely to make a decision to attract
a client who shouldn’t be
attracted.”

Check the last few words there:  Marvin Bower worried that self-centeredness could allow a consultant to attract a client who shouldn’t be attracted.  Money is a powerful motivator, but it isn’t the only healthy focus of a business. When seeking to build, find leaders who are primed to maintain a healthy self-interest, not those that are self-centered.

The third aspect is a healthy engine for developing leaders who think critically. It is fantastically hard for institutions that have grown as personality cults or follower farms to endure. Why? Because they create workforces that are devoid, nay, avoidant of critical thinkers. And, they create “leaders” who learn to spend their time in court politics and scapegoating versus actually solving problems and capturing opportunities.

One large company I had the privilege to get to know well was built by an iconic and temperamental leader. Everyone deferred to him on every detail. The rub?  He wanted to have great leaders around him; he actually wanted the engine to develop leaders, so he invested in human resources and performance management nirvana. But he wasn’t comfortable with his people thinking on their own, so he was unable to get out of his own way. This chairman, CEO, and absolute monarch built a company that was exceptional and generally well-respected but that struggled to develop leaders under his reign.

Ironically, the business itself had exceptional leadership disciples. People were motivated, smart, and able, but they just didn’t take much initiative in true leadership instances because that was the head guy’s job.  The company, a multi-billion dollar firm in the construction services industry, was filled with leadership ability and completely devoid of leaders, which happens if you have no engine for developing leaders who think and act critically.

The fourth aspect is a deep sense of “who we are.”  The greatness of a company is backed by a culture of alignment around greatness and by great defenders of the faith in that culture. Southwest Airlines has this culture: Everyone in the company knows that quality of customer service, on-time performance, and other aspects of great are expected of them every day.

But what gets missed is that Southwest had amazingly effective spiritual leaders in Herb Kelleher and Colleen Barrett for many years. Never lacking in willingness to tell others what she thought, Colleen would very explicitly ensure that the boundaries of Southwest’s culture were clear and attended to; she defended the faith for years and years.  Enduring companies tend to have people like this–people who, without demeaning others or making it a big deal, rule with an iron fist on culture, values, and boundaries.

The fifth aspect of endurance is a healthy focus on performance. Enduring organizations understand what feeds them, and they reward it well. Yes, they even do this in the short term, and they do it well.  For instance, aggressiveness in meeting short-term financial goals can be purposeful, for, e.g., freeing enough cash to invest in new projects or to restructure to ensure new capabilities or meet new markets. Enduring organizations have strategic rationales for short-term performance that, once thresholds for survival and fair returns are met, go to more than simply meeting metrics on a scoreboard.

Which brings up a sixth and final musing on what makes enduring organizations enduring. For this, I use an old Greek proverb:

Society grows great when old men plant trees whose shade they will never see.

That is to say, great institutions become great when the oldest among the population act on behalf of people who they may never meet. They place investments that pay off over decades; they take a flyer here and there. Honda has its first corporate jet in the market today: It was marketed first in 2015, but the project started in the 1980s!  What kind of journey must that have been?

Separately, I had the privilege of working at a private manufacturing firm, Milliken & Company, for a while. Milliken’s corporate headquarters is situated in the midst of a beautiful arboretum, which serves as a very cool metaphor for endurance. Over the course of decades, the company’s iconic leader, Roger Milliken, played out his passion of planting trees: He planted trees whose shade he knew he would never enjoy. Such “noble” trees are a fantastic metaphor for building an enduring company.

Enduring organizations have such planters in their midst, and that’s likely what makes them great.  If you’re in a company where the old men have decided to focus their endurance on merely surviving to retirement, consider what that means: If your old men only worry about getting to their own finish line, your organization’s culture and leadership have failed.

These are only reflections from my own experience. Enduring organizations arise for many reasons, and even if just one of these aspects is not enough, a few may be. One thing is sure, however: endurance is threatened when these aspects are not there.

What do you think makes the difference?